Friday, November 28, 2008

Like so many of history's tales, the story of Thanksgiving may have an economic explanation that differs from the story told by the history books. The history books tell us that the Pilgrims were saved from starvation after the local indians taught them how to plant corn.

But around that same time, the Governor of the Plymouth Colony, William Bradford, identified the problem as one of property rights. Initially, the colony had been formed using a system of comunal property rights. Everyone would work the fields and the harvest would be distributed according to need. Not surprisingly, this system led to several lean years.

Bradford advocated switching to a system of private property rights, where everyone would be able to keep all that they were able to grow, but were also now responsible for feeding themselves. Each family was given a parcel of land, and under the new system, the starvation problems of the previous years were gone. It was at this point that the settlers were able to feast without fear of famine hanging over their heads.

The legacy of lessons learned during the early years in the "New World" are what I'm thankful for during this holiday season.

Thanks to Benjamin Powell of the Independent Institute for the inspriation for this entry.

Thursday, November 27, 2008

After a successful military career, including stints in the Philippines, the Panama Canal Zone, and service in World War I, General Robert E. Wood entered the business world. Wood began working at Montgomery Ward, rising to vice president before leaving the company over a dispute about company strategy. After leaving Ward's in 1924, he joined their main competitor, Sears, Roebuck, where he contributed to their wild successes and their eventual dominance over Ward's.

During his time at Sears, Wood served as a vice president and eventually rose to be the chairman from 1939 to 1954. Wood brought to Sears two key attributes that made him a business success and that helped make American capitalism flourish. The first was a deep knowledge of operations management. During his time in the Panama Canal Zone when the canal was still under construction, he rose to the post of Chief Quartermaster when he quickly mastered the management of a massive workforce as well as a intricate supply network. Contemporary reports indicate that Wood was able to keep enough fresh Portland Cement coming to the canal zone so that workers could be constantly and efficiently employed, but not so much that the humid conditions would spoil any excess supply. This organizational genius would later serve him well in running an ever-expanding Sears. The second trait that Wood brought to the business world was his deep interest and understanding of demographics. Again, during his time in the canal zone, Wood would spend his free time studying the Statistical Abstract of the United States and various Census reports. From this arid study of the trends of the American population, Wood gained a deeply-focused sense of how to stay ahead of changes in settlement patterns and shopping habits.

At Sears, Wood first oversaw the expansion of the company from a strictly mail-order business to one that operated retail locations. He pushed this strategy further when he led the company to open retail locations both in the growing urban centers as well as in the more rural areas, when improved transportation allowed such customers to enjoy shopping at a centralized location.

During the years of World War II, Wood also planned and executed a brilliant corporate expansion strategy that put Sears ahead of its competitors when the post-war economic explosion took place. Unlike his peers, who feared that the end of WWII might bring a return to a recession or even depression conditions, Wood knew from his study of demographics that Americans had been becoming more urbanized and that war-time rationing and Depression Era conditions had created a great pent-up demand for consumer goods. In the decade after WWII ended, thanks to his vision and willingness to make capital investments, Wood oversaw a near tripling of Sears, Roebuck's sales. By the 1967 Christmas season, Sears became the first retailer to reach $1,000,000,000 in sales in one month.

Wood's place as a hero of capitalism comes from his principal achievement, the use of knowledge of demographic trends to dramatically expand his business, thereby resulting in cheaper and more easily-available goods for everyone. Though the Sears company have since faltered, Wood's vision blazed the trail for later retail geniuses such as Sam Walton to continue expanding that sector of the economy and bringing more prosperity to the American people.

Wednesday, November 26, 2008

Today we celebrate the invention of a product that has made millions of people's lives easier and put a stop to squeaky doors around the world - WD-40.

WD-40 literally means "Water Displacement, 40th attempt" in honor of the number of trials it took chemist Norm Larsen and his colleagues of the San Diego Rocket Chemical Co. to produce a solution that would effectively ward off rust.

Developed in 1953, WD-40 was to initially prevent rust corrosion on missile bodies. Discovery of further uses prompted Larsen, in 1958, to come up with a way to distribute the product for commercial use. The aerosol can was his answer. Within two years the company more than doubled in size (to a total of seven employees) and was selling more than 45 cases of WD-40 daily. In 1969, the the company changed its name to WD-40, in honor of its only product. In 1973, when the company officially went public and WD-40 became available to households over the counter, the company grew exponentially - by 1993 estimates place sales at more than one million cans daily.

Today the company prides itself on its product's "2000+" uses. Consumers tend to find WD-40 a "must-have" around the house. In recent years, the company has acquired the products of several other household companies and offer such familiar items as Carpet Fresh, 2000 Flushes, Spot Shot, 3-in-one oil, and others - all of which make our lives easier.

Tuesday, November 25, 2008

While the National Football League may be a ubiquitous, multi-media juggernaut today, the league was once a second-rate group of semi-professional clubs whose quality paled in comparison to college teams. George Halas (1895-1983) played a significant role in the development of professional football, and he formed one of football's most enduring franchises: the Chicago Bears.

After playing in college and minor league sports, Halas had an opportunity in 1920 to manage a football team for his employer in the town of Decatur, Illinois. The A.E. Staley Company, a Starch producer for which he was a sales rep., wanted him to front both baseball and football teams. After early football success with the Staleys, Halas bought that club and moved it to Chicago. The rechristened Bears (named in honor of the baseball Cubs, with whom they shared Wrigley Field) were a founding member of the American Professional Football Association, precursor to the NFL.

Halas was a player, coach, and manager for the Bears. Two of his early major accomplishments were recruiting star talent to the league to bolster its respectability and introducing the T-formation to professional football. After his Bears crushed the Redskins 73-0 in the 1940 title game, the new offensive formation caught on like wildfire and spelled the end for the old single-wing offense.

As a life-long Bears fan, I benefit every autumn from the team and traditions Halas created. Chicago has a great atmosphere for football which allows hundreds of thousands of locals to engage in a passionate, yet nonviolent form of collective association on Sundays. Notwithstanding some of the weaknesses of the modern NFL, professional football and each of its teams enrich the lives of millions of fans every year. For his instrumental role in this outcome, George Halas is today's Hero of Capitalism.

Monday, November 24, 2008

Last week, I introduced Terry Anderson and PERC and talked about how someone can be an environmentalist and a capitalist simultaneously. This week, I present a specific example of a man who initiated a market-based solution to an environmental issue that was important to him.

Hank Fischer is an environmentalist. He is the Special Projects Coordinator for the National Wildlife Federation. And in 2001, he won an award for being not just an environmentalist, but and Enviro-Capitalist.

Fischer made a major mark on the enviro-capitalist world with his efforts to reintroduce wolves to Yellowstone National Park. Opposition from the plan came, not surprisingly, from local ranchers who feared that the wolves would kill their livestock. According to Fischer, when he met with local ranchers to discuss their opposition, one rancher put their concerns into very simply words. “It’s easy to be a wolf lover. It doesn’t cost anything. It’s the people who own livestock who end up paying for wolves." This simple statement made the solution obvious to Fischer. He needed to find a way that these ranchers could be paid for their losses.

At the time, Fischer worked with the Defenders of Wildlife, a group dedicated to projects like wolf reintroduction, and they began fund raising efforts aimed at creating a fund from which farmers could be compensated for any losses. But the necessary funds did not come simply from the kindness of others. They came about once Montana artist Monte Dolack created his vision of how wolves might look if restored to Yellowstone Park. Defenders of Wildlife sold posters of this artwork for $30 each and raised over $50,000, making the idea of a permanent fund a realistic possibility.

By devising a program where the environmentalists took “ownership” of the wolves, Fischer was able to devise a contract with the ranchers. The environmentalists side of the contract is that they will control (move, relocate, or kill) wolves that kill livestock, and compensate the ranchers for their losses, and the rancher’s side is to tolerate wolves that do not kill livestock.

By most measures, the program was a success. Wolves are back in Yellowstone and are growing in numbers. Plans are being put in place to remove them from the endangered species list, thanks in no small part to programs similar to the Yellowstone one in other states that have allowed wolves to thrive.

Fischer has moved on to grizzly bears and is trying to improve upon his plan in his work there. With the benefit of hindsight, Fischer sees flaws in the original program (according to Fischer it took too long, cost too much and still left some with bad feelings), but the environmentalists are happier and ranchers are no worse off after Fischer’s plan than before. So by introducing ownership into a market where external costs were preventing two sides from coming together and finding the best outcome, Fischer use a capitalist notion to advance an environmentalist view – making everyone better off in the exchange. Is anything better than that?

Friday, November 21, 2008

Today we honor King Camp Gillette (1855-1932) for his invention of the disposable safety razor. Gillette wanted to invent something people would use, throw away, and then buy again, allowing the inventor to become very wealthy. He soon came up with the idea of a disposable shaving blade. He worked on developing the razor for six years, and with the help of William Nickerson also developed the T-shaped handle for the razor.

In 1903, Gillette sold 168 blades and by 1904 sales had dramatically increased: he sold 90,000 razors and 123,000 blades. Gillette was also one of the first people to use freebie marketing in his business model; he gave every soldier heading overseas in WWI a free razor.

Gillette soon became a millionaire and retired from active management of his company. Upon retirement he developed interesting economic ideas. Gillette advocated for a economy where engineers ran the world, thinking this would abolish wasteful competition. Among other ideas, he wanted to eliminate the waste of each household preparing its own meals and proposed communal dinning halls as a solution.

Gillette is a Hero of Capitalism, he took his private property and ideas and created vast amounts of wealth. However, he remains an interesting hero because of his economic and social ideas that often seem to contradict his business plan.

Sources:Wikipedia: King Camp GilletteWikipedia: Safety RazorVan Dulken, Stephen. Inventing the 20th Century. New York: New York University Press, 2002.

Thursday, November 20, 2008

Today we honor Charles B. Clark (1844-1891) for putting his private property to work to eventually form Kimberly-Clark Inc. He was one of four original owners that put up $30,000 in 1872 to start a company that largely worked with papers goods. He is credited with having the initial idea for starting a paper company. Today, we know that company for producing amazing products like Kleenex Brand Tissues (yes, I have a cold right now).Throughout Clark's short tenure at the company (he died at age 47, still a part of the company at the time of his death), he helped the firm grow from a few paper mills in Wisconsin to the number one paper producer in the Midwest.

Because of the contributions of Clark and his partners, today Kimberly-Clark is a worldwide company that employs over 55,000 people and had sales of over $18B in 2007. It is well known for its brands like Kleenex Tissues, Kotex, Cottenelle and Huggies. This company has a long history that is really interesting. Check out the company website below for an interactive history of the company that includes pictures and interesting facts about the men who helped make it into a great worldwide company.

We honor Charles B. Clark for using his private capital and intellectual property to help form the Kimberly Clark Company.

Wednesday, November 19, 2008

Edward Clark (1811–1882) helped Isaac Singer found the Singer Sewing Machine company in 1851, eventually leading it to world-wide prominence in the 1870s.

Clark pioneered the use of franchise offices for sales and a network of independent distributors. His multilevel sales division created one of America's first models of multi-level management, helping to create a managerial revolution in business. At its height, the Singer company under Clark's management was shipping 20 to 25,000 machines to all parts of the world.

The sewing machine revolution not only made mass-production clothing possible, but it also enabled easy and cheap repair of clothes in the home. Every time we pull on a comfortable machine-sewn garment, we can thank Edward Clark, a true hero of capitalism.

Tuesday, November 18, 2008

Today we celebrate the pioneers of an industry that swept the world - the video game industry.

Nolan Bushnell and Ted Dabney are the minds behind the video computer system known as ATARI. Bushnell and Dabney began with the introduction of the first arcade game, Pong, in 1971. Four years later, Atari would re-release Pong as a home video game.

The success of Pong - over 150,000 units sold - in a single year prompted the interest of Warner Communications. In 1976, Atari would change hands for the first of many times when Bushnell sold Atari to Warner for $28 million. In the four remaining years of the decade, Atari would reach over $415 million in sales. Atari's success consequently prompted competition.

In the years since Atari's prosperous stint in the 1970s, Atari has faced many challenges - including an anti-trust lawsuit from Nintendo which proved a devastating loss for Atari. The intellectual property rights to Atari's games has since been sold to Hasbro - which has since been acquired by the French company, Infogrames - which re-established Atari as Atari Interactive, and later Atari Inc.

Despite Atari's dwindling success, today we can appreciate the motivation of original pioneers Bushnell and Dabney for kick starting an explosion in home gaming. Today the gaming industry spans the globe. 2007 figures estimate the game industry took in around $9.5 Billion in the U.S. alone.

Monday, November 17, 2008

If you're younger than me, chances are you've never listened to a vinyl record for any reason besides curiosity, a desire to be retro, or the nostalgia of your parents. CDs were introduced in 1982 and by the early 1990's had displaced LPs as the popular format for music albums. Circular records may not have lasted forever, but they enjoyed nearly a century of dominance and cultural transformation after surviving the first great format battle. In the late 1800's, Emile Berliner jumped into the middle of that battle. His invention, a lateral groove audio replaying device named the "Gramophone," would eventually best the vertical groove replaying devices that came before it.

Berliner (1851-1929) did not invent the LP, but the long play vinyl record was based on the discs his Gramophone read from. Thomas Edison's Phonograph and Charles Tainter's Graphophone (from the Bell labs) had met with some success recording and playing back audio, but suffered from numerous deficiencies. Both models were cylindrical playback machines with vertical recording and replaying action. Edison's first model used tin-foil and Tainter's used wax; neither device was replicable at the time and both were fragile. Berliner's development was inspired by an earlier lateral-cut audio recording invention called the phonautograph. While the first known recorded noises are preserved on phonautograph recordings, the device was never intended to replay sounds. Berliner was the first to try this and succeed, using discs, giving the Edison and Tainter models a run for their money.

Development of the Gramophone was a several-year process in which Berliner experimented with glass, celluloid, rubber and shellac discs. There were also two devices required (unlike the cylindrical models): one for recording and one for replaying. What helped Berliner's Gramophone achieve technological and market supremacy was the relative durability of the records and the ease with which they could be reproduced. Cylindrical models lasted until the 1920s while the Gramophone survived and morphed into the record players we're all familiar with. LPs arrived in the late 1940s and stereo recording (which combined vertical and lateral grooving) a decade later.

Berliner didn't invent the first audio playback machine and his invention hasn't survived the never-ending march of technological progress, but as an audio recording and playback innovator he played as important a role as anyone. Because of his ability to coordinate disparate developments in his burgeoning field, Berliner is an excellent example of an entrepreneur and of course, a laudable Hero of Capitalism.

Friday, November 14, 2008

Today we honor Steve Ditko (born November 2nd 1927) for his many contributions to the world of comics. His best known contributions were the co-creating Spiderman and Dr. Strange. Ditko contributed to numerous comics over the years. Sometimes he was just a penciler, sometimes he helped ink the comics, and sometimes he did both. His creativity abounded. Many people find his style to be unique and pleasing. His professional career started in 1953, and he still works today.

Ditko is noted for being particularly careful about the right to have creative control over his creations. It is noted on his official website that he took a lower salary at a smaller firm so that he could maintain control of his creations. During the 1960s, he subscribed Ayn Rand's ideas and considered himself to be a Libertarian politically.

Thursday, November 13, 2008

Erno Rubik invented the Rubik's Cube in Spring 1974 in Budapest, Hungary. Rubik wanted to make a geometric puzzle, so took blocks of wood attached to elastic springs and made an early version of the Rubik's Cube. After the elastic broke, Rubik redesigned the cube with a universal joint type mechanism and put color tape on the outside.

Rubik twisted the cube and found it was difficult to align the colors again, in fact, it took him a month of work to figure out the mathematics of the cube and solve it. The cube Rubik designed has one solution out of three quintillion different possibilities.

Rubik took his invention to a small toy making company in Budapest. The company produced the toy on a small scale and the Rubik's Cube gained in popularity purely through word of mouth.

It wasn't until Tibor Laczi came upon the toy that it became a sensation. Laczi recognized the toy would be a success and so went to Hungary's state trading firm asking for permission to sell the toy in the West. Laczi then met Tom Kremer, a British toy expert, at a trade fair and soon struck a deal with him to produce a million cubes through the Ideal Toy Company.

With this agreement and the Rubik's Cube huge success, Erno Rubik became one of the first self made millionaires from the Communist block.

Wednesday, November 12, 2008

Terry Anderson is an economist and an environmentalist. To a decent percentage of the population, those two things would seem to be in opposition. But not to Anderson. As Executive director of the Property and Environment Research Center (PERC), in Bozeman, MT, Anderson is bringing the lessons of the free market to the challenging world of environmentalism. The basic premise is simple – you don’t change people behaviors by preaching, you change people’s behavior by changing their incentives. If you can make behaviors that are favorable to the environment in the best interest of everyday people, you will make “being green” a natural part of people’s routines.

PERC’s mission is to research the various challenges facing the environment and to educate people about market based environmentalism and through this work to improve environmental quality using markets and property rights.

Anderson has authored and edited numerous books on free market environmentalism and has raised the public consciousness to this line of reasoning enough that he has even had the opportunity to advise George Bush early in Bush’s presidency.

Tuesday, November 11, 2008

Gustavus Franklin Swift (1839–1903) was a pioneer in the meat-packing industry, pioneering the delivery fresh and high quality beef to Americans from New York to California.

Swift began as a cattle buyer and butcher in Massachusetts, eventually moving to Chicago where the railroad nexus had created a centralized market for agriculture and livestock distribution. Swift quickly realized that transporting live cattle was costly since so much of the cow was waste. He turned to the idea of the refrigerated railroad car, which he helped design and implement. Soon after the adoption of the ice-cooled cars in the 1880s, Swift and Co. was transported tens of thousands of tons of beef to New York and beyond.

Swift also led the meat-packing industry in using ever greater portions of the animals until he used "everything but the squeal of the pig." The soap, glue, fertilizer, hairbrushes, knife handles, and pharmaceutical products revolutionized the meat industry. Finally, Swift used vertical integration and mass production line ideas (which later inspired automakers Ransom Olds and Henry Ford) to make the slaughtering and dressing process as efficient as possible.

Monday, November 10, 2008

Today we honor Walt Disney (1901-1966) for his innovation in animation and theme park design. Alongside his brother, Roy Disney, Walt co-founded Walt Disney Production - known now as The Walt Disney Corporation - which became a world leader in motion picture production.

As a film producer, Disney created many now world-famous fictional characters, beginning with Mickey Mouse. Disney's productions later grew to include live-action film. Coupled with animation, Disney's productions landed the company numerous awards and nominations including: 59 Academy Award nominations, 26 Oscar Awards, and 7 Emmy Awards. The company continues to thrive today.

Disney's vision of "Disneyland" which began as a series of sketches in the 1940s eventually became reality in the decade to follow. Today Walt Disney theme parks - Disneyland and Walt Disney World Resorts - occupy grounds around the world - the United Stated, France, China, and Japan.

Walt Disney's self-interest incorporated providing entertainment to the masses. As a result of his pursuit of happiness and profit, we are all better off.

Friday, November 7, 2008

It's often said that in a non-capitalist world, we'd all be equal: equally miserable. Without the invention of today's hero, most people would be equally useless at wrapping Christmas presents. Richard Drew (1899-1980) was a 3M lab worker who, in 1925, invented pressure sensitive adhesive tape.

Drew was looking for a solution to a problem faced by car detailers in the 1920's: the two-toned finishes that were popular then suffered from the two paints running together. The first tape Drew invented was a masking tape that protected edges during painting. His invention was said to have raised early skepticism after a failed initial trial, in which an auto painter referred to the bosses at 3M as "Scotch" (i.e. cheap) for not including enough adhesive. The kinks were shortly worked out, and the rest is history.

Transparent cellulosic tape, another Drew invention, shortly followed masking tape. In the Great Depression, tape was seen as a low-cost preservative of belongings when replacements were not affordable. Building upon its success with tape, 3M went from sandpaper manufacturer to technology-driven conglomerate. Today there are hundreds of varieties of pressure sensitive adhesive tapes, and few more popular than Drew's originals.

Thursday, November 6, 2008

Today we honor Ray Kroc (October 5, 1902 - January 14, 1984) for his innovation in making McDonald's what it is today. Though he was not the original restaurant owner, I think this quote from Time sums up what he did for McDonald's (and ultimately the fast food industry):

"He sensed that America was a nation of people who ate out, as opposed to the Old World tradition of eating at home. Yet he also knew that people here wanted something different. Instead of a structured, ritualistic restaurant with codes and routine, he gave them a simple, casual and identifiable restaurant with friendly service, low prices, no waiting and no reservations. The system eulogized the sandwich — no tableware to wash. One goes to McDonald's to eat, not to dine."

As someone who has been on the road for 8 of the last 10 days, I cannot help but appreciate Ray Kroc's innovations that created a fast way to grab a bite to eat on the road. I wish I could count the hours that McDonald's has saved. Ray Kroc our Hero of Capitalism today because he used private property (McDonald's restaurants) and created vast amounts of wealth, both for himself and those of us who eat there.

Wednesday, November 5, 2008

Today we honor Edward Lowe (1929-1995), the man who "brought the cat indoors" with his invention of Kitty Litter.

Lowe was working for his father's company, which sold industrial absorbents, when he came up with the idea for Kitty Litter. A neighbor, tired of her cat tracking ashes throughout her house, asked Lowe for sand to use in her cats litter box. Lowe suggested using clay instead. The neighbor loved the clay and would soon use nothing else.

Lowe soon began marketing his new invention. He took brown bags full of clay down to the local pet store and asked to sell them. The owner refused, stating people wouldn't be willing to pay 65 cents for their cats litter box when sand was very cheap. Lowe was sure people would be willing to pay for the new product and told the owner to give the Kitty Litter away until people were willing to pay. Lowe was right and soon the shop owner was asking to be able to sell the product.

Shortly after his products success he founded Edward Lowe Industries, Inc, to manufacture and distribute the Kitty Litter. Edward Lowe Industries, Inc. is now a billion dollar industry.

Lowe used his success to found The Edward Lowe Foundation. His foundation's mission is to help foster the entrepreneur through peer learning and help the exchange of ideas.

While a simple and small,Lowe's invention has helped to make taking care of cats simpler and easier. It has allowed for cats to become indoor pets, making him a Hero of Capitalism for pet lovers everywhere.

Tuesday, November 4, 2008

Bill Rasmussen founded the Entertainment and Sports Programming Network, more commonly known today as ESPN. I think I can safely claim that ESPN has changed not only the world of sports, but that it has had an effect on all of cable television. From Rasmussen's own words, "As founder of ESPN, I saw a company and an entire industry explode on the American television scene with breathtaking speed. Its impact forever changed the way Americans watch television." Today ESPN is owned by Disney and between the original network, spinoff stations ESPN2 and ESPN News, its Spanish counterpart ESPN Deportes and the wildly successful ESPN.com, the brand generates revenues in excess of $3 billion annually.

Rasmussen’s idea was to provide a network dedicated exclusively to sports programming. With cable television in its infancy, the idea of a 24-hour sports only station was seen by many as lunacy, but Rasmussen, a lifelong sports fan, recognized the opportunity to fill a niche by feeding the ravenous sports fan more coverage and a higher quality of access and analysis then they have ever had previously.

Of course, the product was not always as sleek and professional as it is today. During the early years, ESPN did not have the resources to land contracts from NCAA college football, Major League Baseball and the National Basketball League (as it does today) and consequently they were forced to be creative in their programming choices, using events like The World’s Strongest Man to fill the their schedule. ESPN’s first show was Sportscenter, on September 7th, 1979, and Sportscenter was the key ingredient to ESPN’s early success. By providing a fun, lighthearted feast of sports highlights, ESPN captured the audience that Rasmussen knew was out there, clamoring for better access to sports.

Today, Sportscenter remains the at the center of the ESPN programming day, but now faces competition from numerous copycat shows that have appeared on the scene to try to duplicate the initial success that ESPN enjoyed.

Monday, November 3, 2008

Pierre Omidyar (b. 1967) began eBay as a hobby, but in the end, he created the world's largest swap meet and second-hand store. With annual revenues over $7 billion (US$), eBay is one of the most successful and world-renowned Internet sites.

Omidyar began the site as a way of facilitating person-to-person auction transactions of collectible items. He started a site called Auctionweb. Within two years of launching the site, the newly-renamed eBay was facilitating over 800,000 auction sales per day. the eBay company has gone on to acquire other crucial Internet services such as PayPal.com and Skype.com to add to the services it offers its close to 100 million registered users.

For creating and developing the technology where the world can buy and sell everything from Star Wars figures to cars to grilled cheese sandwiches with the image of the Virgin Mary on them, Pierre Omidyar is a hero of capitalism for expanding commerce beyond anyone's widlest imagination.